Global growth has picked up

got for the work after it was forced to resell it. All sides agree that the large acrylic-onvinyl painting, depicting Haring’s trademark “radiant baby” figure surrounded by stylized angels and barking dogs, attracted four bidders, with Shagalov coming out on top. A hearing is set for Tuesday, with Sotheby’s claims about falsified evidence expected to take centre stage.

“This is more of an existential question — do we even know what drives inflation?” said Julia Coronado, founder of research firm MacroPolicy Perspectives LLC in New York and a former Fed economist.

This complicates Powell’s task in contemplating how fast to pull away the proverbial punch bowl as the economy gains momentum. In December, the median projection from Fed officials called for three quarterpoint interest rate increases in 2018, but more could be needed.

On Friday, Dallas Fed President Robert Kaplan said three rate hikes this year is the base case, though “it could be more than that, we’ll have to see.” About an hour later, speaking at a different event, San Francisco Fed President John Williams sounded more like he wants to stay the course: “I don’t see an economy that’s fundamentally shifted gear” and “we should stick to that plan” for gradual rate hikes, he said.

Global growth has picked up, jobs gains continue at a robust monthly pace, business investment has risen in recent months and Congress has just passed a set of tax cuts. On the other hand, the Fed’s preferred gauge of inflation, while creeping up to 1.7 per cent in 2017, remains sluggish.

“The good news is inflation has been co-operating recently,” said Michelle Meyer, head of U.S. economics at Bank of America Corp. “But if we fail to see a further acceleration of inflation or see a deceleration, that does create a lot of problems.”

Political flareups, particularly those expressed on Twitter, might also intervene. President Donald Trump, who promoted Powell from Fed governor to succeed Janet Yellen as chairman, has made clear his affinity for low interest rates, as well as his disdain for Washington protocol. If inflation does finally respond to the tight labour market and Powell quickens the pace of rate hikes, he may face the sharpest White House criticism aimed at the Fed since the Nixon administration.

In a video message released Monday, Powell pledged the Fed would continue making monetary policy decisions in “our longstanding, non-partisan tradition.”

He signalled a renewed effort at clearer communication.

“As I begin my term, I want to stress my commitment to explaining what we’re doing and why we are doing it,” he said.

In the meantime, the more existential portion of the inflation question has already resulted in pressure on Powell to initiate a formal re-examination of the Fed’s 2 per cent inflation target. The issue bears watching. Even if the Fed doesn’t end up altering its policy, simply reviewing it might signal Powell will tolerate some period of above-target inflation.

The question of financial stability also looms with low rates helping to fuel a record run for stocks. The two most recent expansions in the U.S. crashed to their respective ends not because the Fed slammed the brakes on an overheating economy, but